Executive Summary

Open data on privately financed infrastructure projects is limited but would be useful. The World Bank’s Private Participation in Infrastructure (PPI) Database shows some of the promise of open data to inform local governments.

Key Takeaways

1. Private investment in national government projects vastly outweighs subnational governments.
2. National summaries hide distinctive characteristics of private investment in local infrastructure.
3. Only a few countries have projects backed by commercial debt, notably India and Brazil.
4. Private investment in energy generation at the local level has made the transition to renewable energy but coal still dominates overall.

The analysis in this report highlights where there are distinctive characteristics in private investment in local governments, but does not attempt to identify the causes or impacts of those differences. Further research will be needed to develop policy responses.

Introduction

The World Bank estimates that the world has USD 94 trillion in unfunded infrastructure needs in the next 20 years.¹ The increased infrastructure needs are being driven by population growth, urbanization and the challenge of meeting the Sustainable Development Goals. Climate change is also driving infrastructure needs by requiring the rapid replacement of carbon-emitting infrastructure and rebuilding infrastructure damaged through climate change-driven extreme weather events and sea-level rise.²

Increasing private investment in infrastructure has been a goal of governments and international institutions such as the World Bank, OECD, and bilateral development banks.³ The World Bank’s Public Private Partnership Group has published a dataset of infrastructure projects that are either completely or partially privately funded.⁴ There is very little open data about privately funded projects compared with projects funded by governments, development banks, or aid agencies. The Private Participation in Infrastructure (PPI) Database stands out for the large number of projects and the depth of information available about each project. The World Bank has published reports analyzing the data through country, sector, and topical lenses, but does so at the country level.

The dataset includes municipal and provincial governments’ projects, which allows for subnational infrastructure projects to be disaggregated to identify the characteristics of private investment below the national level. As this paper will show, private investment in local and provincial governments is different than in national governments, which makes disaggregated analysis crucial to accurately describing the financing landscape and finding opportunities for policymakers to make improvements in infrastructure financing.

There are two major challenges that this landscape analysis hopes to inform. finding enough financing for badly needed infrastructure, and directing private investment into climate-resilient and low carbon infrastructure rather than high carbon-emitting infrastructure. For some projects, the data in the PPI Database is detailed enough to classify it as either low or high carbon, particularly for energy generation and transports, but others require more detail. The Public Private Partnership Group released a report in 2018 finding that there has been a partial shift towards renewables, primarily in the form of hydropower in energy, but road projects are still dominant in transport.⁵

Private Investment by Sector

Private investment is highly sector-specific. Energy receives the most private investment, followed by transport. Local governments stand out because their transport projects receive the most private investment, rather than energy. Water and waste management are significant sectors for local governments but negligible for the others. Water and sewerage and municipal solid waste are the only sectors where local governments receive more private investment than provincial or national governments.

Each sector is split up into more detailed categories that are explored further below.

Private Investment by Region

Levels of investment by government type look very different by region. In particular, East Asia and the Pacific sees higher levels of investment in local/municipal governments. Almost 30% of private investment into the region goes to local governments, which is over four times higher than any other region. Subsaharan Africa is the region with the smallest share of private investment in local governments receiving only 0.4% of private investment.

Governments in South Asia capture the highest share of private money flowing to state and provincial governments. They receive 48% of private investment while local governments that region only receive 2%. Europe and Central Asia, the Middle East and North Africa, East Asia and Pacific all receive less private investment into state/provincial governments than into local/municipal governments.

There are no regions where national governments receive less than 50% of private investment.

Private Sponsors

Every project in the PPI Database has sponsors which are “private entities that together have an equity participation of at least 20% in the project contract for Greenfields, brownfields, and management and lease contracts, and 5% for divestitures.”⁷ Because the PPI Database only includes infrastructure projects with private participation, every project has private sponsors. The number of private sponsors involved in a project ranges from 1 to 4.

The country that a sponsor is based in is recorded for most sponsors, which allows for the international aspect of private infrastructure investment to become visible. China, India, and Brazil, which dominate private investment have interesting differences. China has the most sponsors headquartered there at the local level, and the top sponsors by investment at the local level are dominated by fifteen Chinese firms involved in solid waste, water and sewerage, and energy projects. The greatest number of sponsors involved at the state/provincial level are headquartered in India and eleven of the top firms by investment are Indian energy or transport companies. Brazil has the greatest number of sponsors active at the national level headquartered in it. Seven Brazilian firms are in the top 20 by investment, outnumbered by firms from wealthy countries like the United States, France, Spain, Italy, and Portugal.

Commercial Banks

Overall, 10% of projects have debt financing from commercial banks, but local/municipal governments see the least for every sector. for local/municipal projects, transport has the highest rate of commercial debt financing at just over 3%. In contrast, at the state/provincial level over 18% of energy projects have commercial debt financing and over 22% of national level, solid waste projects do.

The country of commercial banks is not recorded in the database, but whether they were national or international is included. As might be expected, the percentage of debt financing from international banks varies by country, but it also varies the level of government, indicating that access to domestic private debt capital is different for different types of government within the same country.

Appendix 1: Country Summaries

Appendix 2: Interactive Map of Private Subnational Infrastructure Investment

Notes